Customer relationship management (CRM) king salesforce.com (CRM 3.50%) posted yet another solid quarter of growth in its fiscal second quarter of 2018. Both revenue and adjusted earnings per share (EPS) beat analysts' estimates, and the company raised its guidance for full-year fiscal 2018 revenue for the third quarter in a row.
With Salesforce performing so well recently, it's a good time for investors to give an ear to management to see just how sustainable this growth really is. Fortunately, Salesforce's second-quarter earnings call was packed with useful commentary about the CRM cloud software leader. Here's a look at the conference call's three most insightful quotes.
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Management's goal: To double revenue again
During its second quarter, Salesforce achieved an annual revenue run rate of $10 billion for the first time. As Salesforce CEO Marc Benioff proudly noted, just two and a half years ago, Salesforce was at a $5 billion revenue run rate.
But Benioff is already reorienting the company toward its next revenue goal -- and it's big.
"And this incredible achievement is now coupled with an incredible dream. We now set our sights on $20 billion and doubling the company again," Benioff noted (via an S&P Global Market Intelligence transcript of the earnings call).
Benioff said Salesforce will be able to achieve this goal organically, with growth driven by its "unmatched product portfolio, world-class team and ... $15 billion in booked business on and off the balance sheet."
Salesforce's competitive advantage
As the global leader in CRM, Salesforce benefits from significant scale and high customer switching costs. This scale, and the degree to which Saleforce's customers are entrenched in its comprehensive CRM ecosystem, help protect Salesforce's leadership position. During the second-quarter earnings call, Benioff shared some metrics that captured the scale and breadth of the company's products:
And we're delivering this at a scale every single day, creating nearly 3 million sales opportunities, more than 5 million customer cases, sending 1.4 billion emails, processing 1 million purchases and producing 40 million reports and dashboards every single day -- that's 1 billion reports and dashboards a month, by the way -- all the while delivering more than 5 billion platform transactions a day.
Salesforce is critical to its customers. And as it scales its capabilities to cater to a growing base of clients, it is becoming increasingly integral. Meanwhile, Salesforce's entrenched customers can vouch for the cloud software's effectiveness to prospective new clients.
AI: Salesforce's next big growth driver?
As the first company to bring mobile to CRM, Salesforce has seen mobile become a huge growth driver. The company has aggressively built out its mobile capabilities over the years and stayed at the forefront of mobile integrations for CRM. Now Salesforce believes artificial intelligence (AI) could similarly lead to major opportunities. Indeed, it's betting that its Einstein AI integration will bolster its early competitive lead in AI for CRM.
Benioff explained:
Because we're the first company to take the robust AI capabilities, including machine intelligence, machine learning and deep learning, and offer that to our customers in a unified CRM platform through our sales, service, marketing applications, commerce applications across the board, that has really happened faster than we expected, more deeply than we've expected, and it's been more exciting for our customers than we expected. I think also, the branding choice that we made with Einstein also exceeded our expectations because it let us rapidly communicate to our customers that we've extended our core platform with artificial intelligence.
As Benioff noted in Salesforce's second-quarter earnings call, research company IDC has massive expectations for the impact of AI on CRM. IDC forecasts that the combination of CRM and AI will help increase global business revenue by $1.1 trillion by 2021.
In a June 2017 Salesforce press release about IDC's research on AI and CRM, Salesforce articulated the opportunity:
With the convergence of increased computing power, big data and breakthroughs in machine learning, AI is also poised to transform how people work. ... From predictive sales lead scoring to service chatbots to personalized marketing campaigns, AI could provide every employee with tools to be more productive and provide smarter, more personalized customer experiences.
Salesforce's overall message in its earnings call was clear: Thanks to its leadership position and a growing market opportunity, management believes its recently achieved $10 billion annual revenue run rate is just the beginning.
